Chapter 2: Required Procurement Elements and Suggested Best Practices

II. Required Procurement Elements and Suggested Best Practices

II.1. Systemwide Elements

1) Written Standards of Conduct

(1) “The Common Grant Rules require each recipient to maintain written standards of conduct governing the performance of its employees engaged in the award and administration of contracts.”

“…no employee, officer, agent, or board member, or his or her immediate family member, partner, or organization that employs or is about to employ any of the foregoing may participate in the selection, award, or administration of a contract supported with FTA assistance if a conflict of interest, real or apparent, would be involved. Such a conflict would arise when any of those previously listed has a financial or other interest in the firm selected for award.”

“The recipient’s officers, employees, agents, or board members may neither solicit nor accept gifts, gratuities, favors, or anything of monetary value from contractors, potential contractors, or parties to subagreements. The recipient may set minimum rules when the financial interest is not substantial or the gift is an unsolicited item of nominal intrinsic value.”

“To the extent permitted by State or local law or regulations, such standards of conduct will provide for penalties, sanctions, or other disciplinary action for violation of such standards by the recipient’s officers, employees, agents, board members, or by contractors or subrecipients or their agents.” [FTA C 4220.1F (MS Word), III, 1.a, b, c.]

2) Contract Administration System

“The Common Grant Rules require the recipient to maintain a contract administration system to ensure that it and its third party contractors comply with the terms, conditions, and specifications of their contracts or purchase orders and applicable Federal, State and local responsibilities.” [FTA C 4220.1F (MS Word), III, 3.]

3) Written Protest Procedures

(1) “FTA expects each recipient to have appropriate written protest procedures, as part of its requirement to maintain or acquire adequate technical capacity to implement the project.

Recipients are required “to notify FTA when they receive a third party contract protest to which this circular applies, and to keep FTA informed about the status of the protest.

The protester must exhaust its administrative remedies by pursuing the recipient’s protest procedures to completion before appealing the recipient’s decision to FTA.

The protestor must be an “interested party,” that is, “a party that is an actual or prospective bidder whose direct economic interest would be affected by the award or failure to award the third party contract at issue.

FTA will limit its review of third party contract protests as follows:

The recipient does not have protest procedures, or

Has not complied with its protest procedures, or

Has not reviewed the protest when presented an opportunity to do so.

When a Federal law or regulation is involved…”FTA will exercise discretionary jurisdiction over those appeals involving issues important to FTA’s overall public transportation program.

The protestor must deliver its appeal to the FTA Regional Administrator…within five (5) working days of the date when the protestor has received actual or constructive notice of the recipient’s final decision,” or …”when the protestor has identified other grounds for appeal to FTA,” such as “the recipient’s failure to have or failure to comply with its protest procedures or failure to review the protest.” [FTA C 4220.1F (MS Word), VII, 1.a. b.]

4) Prequalification System

“A recipient may prequalify people, firms, or products for participation in its procurements provided that:

…lists used in acquiring property and services are current.

…lists include enough qualified sources to ensure maximum full and open competition.

The recipient permits potential bidders or proposers to qualify during the solicitation period (from the issuance of the solicitation to its closing date), as set forth in the Common Grant Rule for governmental recipients. Evaluations for prequalification, however, need not be accelerated or truncated. FTA does not require a recipient to hold a particular solicitation open to accommodate a potential bidder or proposer that submits a person, firm, or product for approval before or during that solicitation.” [FTA C 4220.1F (MS Word), VI, 1.c]

[Note: Grantees are not required, or encouraged, to have a prequalification system. Prequalification systems are difficult and costly to maintain in a way that does not inhibit competition. The intent of this element is to ensure that, if a grantee maintains a prequalification list for one or more products or services, or a qualified manufacturers list, such lists are current and provide full and open competition.]

5) Procedures for Ensuring Most Efficient and Economic Purchase

“Proposed procurements should be reviewed to avoid the purchase of property and services the recipient does not need (including duplicative items and unnecessary options)…. Consideration should be given to consolidating or breaking out procurements to obtain a more economical purchase…To obtain the best value, lease versus purchase alternatives for acquiring property should be reviewed and, if necessary, an analysis should be obtained to determine the more economical alternative.” FTA requires the recipient to make a written determination of the cost of leasing the asset compared with the cost of purchasing or constructing it.” [FTA C 4220.1F (MS Word), IV, 1.b. c. e.]

II.2. INDIVIDUAL PROCUREMENT ELEMENTS

7) Independent Cost Estimate

“The Common Grant Rules require the recipient to perform a cost or price analysis in connection with every procurement action ...as a starting point, the recipient must make independent estimates before receiving bids or proposals” [FTA C 4220.1F (MS Word), VI, 6.; BPPM § 2.3.2]

8) A&E Geographic Preference

“Geographic location may be a selection criterion [in procurements for architectural and engineering (A&E) services] provided an appropriate number of qualified firms are eligible to compete for the contract, given the nature and size of the project.” [FTA C 4220.1F (MS Word), VI, 2.a. (4) (g); BPPM § 6.5]

9) Unreasonable Qualification Requirements

Example of situation restrictive of competition: “Unreasonable requirements placed on bidders or offerors in order for them to qualify to do business” [FTA C 4220.1F (MS Word), VI, 2.a. (4) (a); BPPM § 2.4.2.1]

11) Organizational Conflict of Interest

Example of situation restrictive of competition: “Organizational Conflict of Interest. An organizational conflict of interest occurs when any of the following circumstances arise:

Lack of Impartiality. When the contractor is unable, or potentially unable, to render impartial assistance or advice to the recipient due to other activities, relationships, contracts, or other circumstances.

Impaired Objectivity. When the contractor’s objectivity in performing the contract work is or might be otherwise be impaired due to other activities, relationships, contracts, or other circumstances.

“When it is impractical or uneconomical to make a clear and accurate description of the technical requirements of the property… a ‘brand name or equal’ description may be used as a means to define the performance or other salient characteristics of a specific type of property. The recipient, however, must state the salient characteristics of the named brand that offerors must provide.” [FTA C 4220.1F (MS Word), VI, 2.a. (3); BPPM § 4.3.2, 4.4.1, 4.5.1, and 4.5.2]

15) Contract Term Limitation

“To comply with 49 U.S.C 5325 (e)(1), a multi - year third party contract to purchase additional rolling stock and replacement parts may not have options that extend more than five years after the date of the original contract.”

“FTA interprets this five-year period as covering the recipient’s rolling stock and replacement needs from the first day when the contract becomes effective to those at the end of the fifth year. This means that the contract may not encompass more rolling stock and replacement parts than the recipient needs within five years. The five-year rule does not mean delivery, acceptance, or even fabrication must be completed in five years – only that a contract is limited to purchasing no more than the recipient’s rolling stock or replacement parts needs for five years based on the effective date of the contract.” [FTA C 4220.1F (MS Word), IV, 2.e.(10)]

16) Written Procurement Selection Procedures

“The Common Grant Rules require that each solicitation provide for the following…Identify all factors to be used in evaluating bids or proposals.” FTA C 4220.1F (MS Word), VI, 2.e.; BPPM § 4.3.2, 4.4.1, 4.5.1, and 4.5.2]

17) Solicitation Prequalification Criteria

A recipient may prequalify people, firms, or products for participation in its procurements provided that:

“Lists. The recipient ensures that all its prequalification lists used in acquiring property and services are current. [FTA C 4220.1F (MS Word), VI, 1.c.(1)]

“Sources. The recipient ensures that all its prequalification lists include enough qualified sources to ensure maximum full and open competition.” [FTA C 4220.1F (MS Word), VI, 1.c.(2)]

“Qualification Periods. The recipient permits potential bidders or proposers to qualify during the solicitation period )from the issuance of the solicitation to its closing date).” [FTA C 4220.1F (MS Word), VI, 1.c.(3)]

18) Award to Responsible Contractors

“A recipient may award a contract …only to a ‘responsible’ contractor capable of successfully performing under the terms and conditions of the contract. To determine responsibility, the recipient must consider the following criteria before awarding the contract:

19) Sound and Complete Agreement

“The Common Grant Rules require that all third party contracts include provisions adequate to form a sound and complete agreement.” [FTA C 4220.1F (MS Word), III, 3.b.]

“Third party contracts exceeding $100,000 must include administrative, contractual, or legal remedies for violations or breach of the contract by the third party contractor.” [FTA C 4220.1F (MS Word), IV, 2.b. (6) 2]

20) No Splitting [Micro-purchase]

21) Fair and Reasonable Price Determination [Micro-purchase]

“FTA’s only documentation requirement for micro-purchases is a determination that the price is fair and reasonable and a description of how the recipient made this determination.” [FTA C 4220.1F (MS Word), VI, 3.a. (2) (c); BPPM § 4.1]

“The Common Grant Rule … advises the recipient to describe technical requirements in terms of ‘functions to be performed or performance required, including the range of acceptable characteristics or minimum acceptable standards.’” [FTA C 4220.1F (MS Word), III, 3.a.(1) (d)]

“In order for sealed bidding to be feasible, the following conditions should be present: A complete, adequate, and realistic specification or purchase description is available.” [FTA C 4220.1F (MS Word), VI, 3.c. (1) (a)]

“If this procurement method is used . . . the invitation for bids will include any specifications and pertinent attachments…in order for the bidder to properly respond.” [FTA C 4220.1F (MS Word), VI, 3.c. (2) (c)]

25) Adequate Competition - Two or More Competitors

“In order for sealed bidding to be feasible, the following conditions should be present: . . . Two or more responsible bidders are willing and able to compete effectively for the business.” [FTA C 4220.1F (MS Word), VI, 3.c. (b)]

34) Lowest Price [Sealed Bid]

35) Rejecting Bids [Sealed Bid]

“Any or all bids may be rejected if there is a sound, documented business reason” [FTA C 4220.1F (MS Word), VI, 3.c. (2) (g)]

36) Evaluation [RFP]

“If this procurement method is used the following requirements apply: …

All evaluation factors will be identified in the procurement documents along with their relative importance; numerical or percentage ratings or weights, however, need not be disclosed… [FTA C 4220.1F (MS Word), VI, 3.d. (2) (b)]

The recipient will have a method in place for conducting technical evaluations of the proposals received and for selecting awardees.” [FTA C 4220.1F (MS Word), VI, 3.d. (2) (d)]

37) Price and Other Factors [RFP]

“If this procurement method is used the following requirements apply: . . . Award will be made to the responsible firm whose proposal is most advantageous to the recipient’s program with price and other factors considered.” [FTA C 4220.1F (MS Word), VI, 3.d. (2) (e)]

38) Sole Source if Other Award is Infeasible

“Procurement by noncompetitive proposals may be used only when the award of a contract is infeasible under small purchase procedures, sealed bids, or competitive proposals and at least one of the following circumstances applies:” [FTA C 4220.1F (MS Word), VI, 3.i.(1)]

“When the supplies or services are available from only one responsible source, and no other type of supplies or services will satisfy the recipient’s requirements; or” [FTA C 4220.1F (MS Word), VI, 3.i.(b)]

“When the recipient’s need for the supplies or services is of such unusual and compelling urgency that the recipient would be seriously injured unless the recipient is permitted to limit the number of sources from which it solicits bids or proposals, or when the public exigency or emergency for the requirement will not permit a delay resulting from a competitive solicitation;” or [FTA C 4220.1F (MS Word), VI, 3.i.2(c)]

39) Cost Analysis Required [Sole Source]

40) Evaluation of Options

“Options may be included in contracts to assure the future availability of property or services. An option is a unilateral right in a contract by which, for a specified time, a recipient may elect to purchase additional equipment, supplies, or services called for by the contract, or may elect to extend the term of the contract.” [FTA C 4220.1F (MS Word), IV, 1.d.]

“In awarding the basic contract … the recipient shall evaluate offers for any option quantities or periods contained in a solicitation when it has been determined prior to soliciting offers that the recipient is likely to exercise the options.” [FTA C 4220.1F (MS Word), VI, 7.b.]

“When options have not been evaluated as part of the award, the exercise of such options will be considered a sole source procurement.” [FTA C 4220.1F (MS Word), V, 7.a. (1) (c) 1]

41) Cost or Price Analysis

Cost analysis

“The Common Grant Rules require the recipient to perform a cost or price analysis in connection with every procurement action, including contract modifications. The method and degree of analysis is dependent on the facts surrounding the particular procurement situation . . . . ” [FTA C 4220.1F (MS Word), VI, 6.]

“A cost analysis must be performed when the offeror is required to submit the elements (i.e., labor hours, overhead, materials, etc.) of the estimated cost, (e.g., under professional consulting and architectural and engineering services contracts, etc.)” [FTA C 4220.1F (MS Word), VI, 6.a.]

“A cost analysis will be necessary when adequate price competition is lacking . . . unless price reasonableness can be established on the basis of a catalog or market price of a commercial product sold in substantial quantities to the general public . . . ” [FTA C 4220.1F (MS Word), VI, 6.a.]

“A cost analysis will be necessary when adequate price competition is lacking . . . unless price reasonableness can be established on the basis of . . . prices set by law or regulation”. [FTA C 4220.1F (MS Word), VI, 6.a.]

“A cost analysis will be necessary . . . for sole source procurements, including contract modifications or change orders, unless price reasonableness can be established on the basis of a catalog or market price of a commercial product sold in substantial quantities to the general public . . . ” [FTA C 4220.1F (MS Word), VI, 6.a.]

“A cost analysis will be necessary . . . for sole source procurements, including contract modifications or change orders, unless price reasonableness can be established on the basis of . . . prices set by law or regulation.” [FTA C 4220.1F (MS Word), VI, 6.a.]

“A price analysis may be used in all other instances to determine the reasonableness of the proposed contract price.” [FTA C 4220.1F (MS Word), VI, 6.b.]

Profit

“The recipient will negotiate profit as a separate element of the price for each contract in which there is no price competition . . . .” [FTA C 4220.1F (MS Word), VI, 6.a.(3)]

“The recipient will negotiate profit as a separate element of the price for each contract …in all cases where cost analysis is performed.” [FTA C 4220.1F (MS Word), VI, 6.a.(3)]

“To establish a fair and reasonable profit, consideration will be given to:

Contractor Selection. …state the reasons for contractor selection or rejection…include a written responsibility determination for the successful contractor.

Cost or Price. Each recipient must evaluate and state its justification for the contract cost or price.” [FTA C 4220.1F (MS Word), III, 3. d. (1)]

43) Exercise of Options

“Options may be included in contracts to assure the future availability of property or services. An option is a unilateral right in a contract by which, for a specified time, a recipient may elect to purchase additional equipment, supplies, or services called for by the contract, or may elect to extend the term of the contract.” [FTA C 4220.1F (MS Word), IV, 1. d.]

“Consistency with the Contract. A recipient must ensure that the exercise of an option is in accordance with the terms and conditions of the option stated in the initial contract awarded.” [FTA C 4220.1F (MS Word), V, 7. a. (1) (a)]

“Price. An option may not be exercised unless the recipient has determined that the option price is better than prices available in the market or that the option is the more advantageous offer at the time the option is exercised.” [FTA C 4220.1F (MS Word), V, 7. a. (1) (b)]

44) Out of Scope Changes

“A contract change that is not within the scope of the original contract is considered a sole source procurement….” [FTA C 4220.1F (MS Word), VI, 3.i.(1)(b)]

45) Advance Payments

“Advance payments are payments made to a contractor before the contractor incurs costs in the performance of the contract. The following principles and restrictions apply:

Use of FTA Funds Prohibited. FTA does not authorize the use of Federal assistance to make payments to a third party contractor before the contractor has incurred the costs for which the payments would be attributable….A recipient that seeks to use FTA or local share funds to support advance payments should contact its Regional Office to obtain FTA concurrence.” [FTA C 4220.1F (MS Word), IV, 2.b.(5)(b).1, 2]

Customary Advance Payments. FTA concurrence is required only when advance payment or payments customarily required in the market place exceed $100,000.” [The circular notes that advance payments falling into this category would include such things as utility services, and subscriptions to newspapers and magazines.] [FTA C 4220.1F (MS Word), IV, 2.b.(5)(b)2 b]

46) Progress Payments

“Progress payments are payments for costs incurred by the contractor in the performance of the contract before the contract work has been completed. FTA assistance may be used to support progress payments provided:

the recipient obtains adequate security for those payments, and

has sufficient documentation to substantiate the work performed for which payment is requested.

Progress payments for construction contracts may be made on a percentage of completion basis (as described in the Common Grant Rules). This payment method may not be used in non-construction contracts.” [FTA C 4220.1F (MS Word), IV, 2.b.(5)(c)]

47) Time and Materials Contracts

“The Common Grant Rule …permits the use of time and material type contracts only:

Restricted Use. After a determination that no other type of contract is suitable; and

Firm Ceiling Price. If the contract specifies a ceiling price that the contractor shall not exceed except at its own risk.” [FTA C 4220.1F (MS Word), VI, 2.c.(2)(b)]

48) Cost Plus Percentage of Cost

“The Common Grant Rules expressly prohibit the use of the cost plus a percentage of cost and percentage of construction cost methods of contracting.” [FTA C 4220.1F (MS Word), VI, 2.c.(2)(a)]

49) Liquidated Damages Provisions

“Delay. FTA has determined that a recipient may use liquidated damages if the recipient reasonably expects to suffer damages through delayed contract completion and the extent or amount of such damages would be difficult or impossible to determine. The rate and measurement period must be specified in the third party contract and may not be excessive. The assessment for damages is usually established at a specific rate per day for each day beyond the contract’s delivery date or performance period, but a measurement period other than a day may be established if appropriate. Any liquidated damages recovered shall be credited to the project account involved unless the FTA permits otherwise.” [FTA C 4220.1F (MS Word), IV, 2.b.(6)(b)1]

50) Piggybacking

“Assignment of Rights. Although FTA does not encourage the practice, a recipient may assign its contractual rights to purchase property and services to other recipients if the original contract contains an appropriate assignability clause that provides for the assignment of all or a portion of the specified deliverables as originally advertised, competed, evaluated, and awarded, or other appropriate assignment provisions. Some refer to this process as “piggybacking.”

“If the supplies or services were solicited, competed and awarded through the use of an indefinite-delivery-indefinite-quantity (IDIQ) contract, then both the solicitation and contract award must contain both a minimum and maximum quantity that represent the reasonably foreseeable needs of the party(s) to the solicitation and contract.”

“An FTA recipient that obtains these contractual rights through assignment may exercise them after first determining the contract price remains fair and reasonable, and all Federal requirements have been addressed in the contract’s clauses. The recipient is not required to perform a second price analysis if a price analysis was originally performed. However, the recipient must determine the contract price or prices originally established are still fair and reasonable.”

51) Qualifications Exclude Price [A&E]

“When Required. Qualifications-based proposal procedures are required for projects related to or leading to a construction project. These procedures must be used not only when contracting for architectural and engineering services, but also for program management, construction management, feasibility studies, preliminary engineering, design, architectural, engineering, surveying, mapping, and related services. Grantees shall use qualifications-based competitive proposal procedures [i.e. Brooks Act Procedures when contracting for A&E services as defined in 40 U.S.C. Sections 1101 - 1104 and 49 U.S.C. Section 5325(b)(1)]. When this procurement method is used, the following requirements apply: [FTA C 4220.1F (MS Word), VI, 3.f.(3)]

“Design-Build. An FTA recipient must procure design-build services through means of qualifications-based competitive proposal procedures based on the Brooks Act…when the preponderance of the work to be performed is considered to be for architectural and engineering, program management, construction management, feasibility studies, preliminary engineering, design, architectural, engineering, surveying, mapping, or related A&E services. (A&E) services…qualifications-based competitive proposal procedures may not be used to procure design-build services when the preponderance of the work to be performed are services other than those listed in the previous sentence, unless required by State law.” [FTA C 4220.1F (MS Word, VI, 3.h.]

52) Serial Price Negotiations [A&E]

When this procurement method is used, the following requirements apply:

Most Qualified. Negotiations are conducted with only the most qualified offeror; and

Next Most Qualified. Failing agreement on price, negotiations with the next most qualified offeror and, if necessary, negotiations with successive offerors in descending order must be conducted until a contract award can be made to the offeror whose price the recipient believes is fair and reasonable.” [FTA C 4220.1F (MS Word), VI, 3.f.(3)]

53) Bid Security [Construction Over $100,000]

“Bonding. The Common Grant Rules require bonds for all construction contracts except to the extent FTA determines that the Federal interest is adequately protected through other arrangements. FTA’s bonding policies are as follows:

Bid Guarantee. Both FTA and the Common Grant Rules require a bid guarantee from each bidder equivalent 5 percent of the bid price. The ‘bid guarantee’ shall consist of a firm commitment such as a bid bond, certified check, or other negotiable instrument accompanying a bid as assurance that the bidder will honor its bid upon acceptance of his bid [FTA C 4220.1F (MS Word), IV, 2.h.(1)(a)]

54) Performance Security [Construction Over $100,000]

“Bonding. The Common Grant Rules require bonds for all construction contracts except to the extent FTA determines that the Federal interest is adequately protected through other arrangements. FTA’s bonding policies are as follows:

Performance Bond. Both FTA and the Common Grant Rules require a performance bond on the part of the contractor for 100 percent of the contract price. A ‘performance bond’ is one executed in connection with a contract to secure fulfillment of all the contractor’s obligations under such contract” [FTA C 4220.1F (MS Word), IV, 2.h.(1)(b)]

55) Payment Security [Construction Over $100,000]

“Bonding. The Common Grant Rules require bonds for all construction contracts except to the extent FTA determines that the Federal interest is adequately protected through other arrangements. FTA’s bonding policies are as follows:

Payment Bond. A ‘payment bond’ is one executed in connection with a contract to assure payment as required by law of all people supplying labor and material in the execution of the work provided for in the contract. FTA has determined the following payment bond amounts are adequate to protect FTA’s interest and will accept a local bonding policy that meets the following minimums:

Less Than $1 Million. Fifty percent of the contract price if the contract price is not more than $1 million;

More Than $1 Million but Less Than $5 Million. Forty percent of the contract price if the contract price is more than $1 million but not more than $5 million; or

More Than $5 Million. Two and a half million dollars if the contract price is more than $5 million.” [FTA C 4220.1F (MS Word), IV, 2.h.(1)(c)]

A recipient that wishes to adopt less stringent bonding requirements, for a specific class of projects, or for a particular project, may submit its policy and rationale to its FTA Regional Office for approval.” [FTA C 4220.1F (MS Word), IV, 2.h.(1)(e)]

56) Clauses

“FEDERAL REQUIREMENTS THAT MAY AFFECT A RECIPIENT’S ACQUISITIONS. Before FTA assistance may be used to support an acquisition of property or services, all applicable Federal requirements, whether or not addressed in the Common Grant Rules, must be fulfilled.” [FTA C 4220.1F (MS Word), IV, 2.]

[FTA Circular 4220.1F, Appendix D, contains a matrix of Federally required clauses and contractor certifications for various dollar values and types of procurements, such as construction, A&E. rolling stock, materials, etc. Instructions for these clauses and suggested clause language may be found in the FTA “Best Practices Procurement Manual,” Appendix A.1]